BA 315 Marketing Management Lindell’s Lecture Notes CHAPTERS 3 & 4 B (supplement) YOUR COMPETITIVE ANALYSIS Expanded BA 315 Marketing Management

Market Structure and Competitor Analysis Performing a market analysis to identify your major competitors. Performing a competitor analysis. Alternative sources of information for analyzing competitors

Analyze Critical Development of Marketing Plan Defining the competition is important in determining which products are competing. Studying competitors is crucial to develop a value proposition. It is beneficial to anticipate competitor’s moves and act in a preemptory fashion.

Market Structure Analysis A market structure analysis enables the marketing manager to understand the competition. Overlooking an important competitive threat can be disastrous. Ambiguous definition of the competition creates uncertainty.

Different Terms Used in Defining a Market Industry. Product class. Product types. Product brands.

Competition Is Defined by the Customer Product form competition - includes only products or services of the same product type. Product category competition - products that have similar features and provide the same basic function. Generic competition - incorporates the customer’s notions of substitutability. Budget competition - products and services that are purchased from the same general budget.

Competition Is Defined by the Customer Product form competition - includes only products or services of the same product type.

Competition Is Defined by the Customer Product category competition - products that have similar features and provide the same basic function. .

Competition Is Defined by the Customer Generic competition - incorporates the customer’s notions of substitutability

Competition Is Defined by the Customer Budget competition - products and services that are purchased from the same general budget.

Critical Differences- Competitor Levels Product form or product category competition are inward oriented. Generic competition is outward oriented. Product form and product category competitors are defined by product that look like yours. Generic competitors are defined by looking outside the firm to the customers.

The Marketing Manager’s Job Product form level - marketing activities directly aimed at similar competitors. Product category level - you must convince customers that the product form is the best. Generic competition level - you must convince customers the product category solution is superior

Customer Target Change Product form competition involves battling for exactly the same customers. Generic competition can destroy entire product categories when a major innovation occurs

Measurement Issues Government documents provide valuable information about product form and category competitors. Consulting firms, trade associations, and professional publications may supply own product category data.

Cross-Elasticity of Demand Indicator of substitutability. Percentage change in one product’s sales due to a percentage change in a marketing variable for another product. Cross-elasticity - price is positive, the two products are considered to be competitive.

Competitor Strengths and Weaknesses The ability of the competitor to conceive and design new products. The ability of each competitor to produce the product. The ability to market. The ability to finance. The ability to manage.

Competitor Strengths and Weaknesses The ability of the competitor to conceive and design new products.

Competitor Strengths and Weaknesses The ability of each competitor to produce the product.

Competitor Strengths and Weaknesses The ability to market.

Competitor Strengths and Weaknesses The ability to finance.

Competitor Strengths and Weaknesses The ability to manage.

Competitor Analysis A determination of the competitors’ major objectives. An assessment of their marketing strategies. An assessment of their strengths and weaknesses. An internal analysis of your firm’s strengths and weaknesses relative to competitors

Competitor Strategies Marketing managers must monitor: Segments pursued. Competitors targets. Product features. Core strategy. Supporting marketing mix.

Customer and Competitor Target Product sales literature. Your own sales force. Trade advertising.

Core Strategies Studying their marketing communications. How are they differentiating themselves? What is their value proposition?

Supporting Marketing Mix Price - What is the pattern of price change over time? Communication - What advertising media are being used? Distribution - What kinds of selling approaches are being used? Product capabilities - a comparison of capabilities is useful.

Expected Future Strategies Sometimes competitors tell you what their future strategy will be. Identifying a trend in their past actions and extrapolating it into the future. Forecast competitors’ action by simulating them. Use scenario planning.

SWOT Analysis Strengths. Weaknesses. Opportunities. Threats

Secondary Sources Internal sources. Annual reports. Patent and trademark filings. General business and trade publications. Consultants. Trade associations. Help wanted ads. Electronic data services.

Primary Sources Sales force and customers. Employees. Suppliers. Reverse engineering or sampling. Competitors’ products. Plant tours. Internet newsgroups.

YOUR COMPETITION: Even though you may have done a great job in pinpointing and studying your market segment the job isn't done until you have considered your competition. My main competitors in my market area are: Name of firm (list)

YOUR COMPETITION: Based on my market research of statistical data (such as Sales Management) the amount of buying power per business represented in my area for this kind of business is $‑. If 1 can generate that amount of sales, it: will be sufficient for me to operate successfully. Five reasons why customers would buy from me rather than my competitors are: Five weaknesses my business will have, in comparison to my competitors, are: In order to overcome these weaknesses, I will:

STEPS OF COMPETITIVE ANALYSIS 1. DEFINE THE TARGET MARKET 2. DEFINE THE DIRECT COMPETITORS (SERVING THE SAME MARKET     SEGMENT(S) USE...PERCEPTUAL MAPPING          A. MULTIDIMENTIONAL SCALING          B. FACTOR ANALYSIS 3. ASSESS COMPETITIVE DYNAMICS          A. PIONEERING ADVANTAGE          B. POTENTIAL FOR TECHNOLOGY DISCONTINUITY          C. IDENTIFY FUTURE COMPETITORS (NEW ENTRANTS)          D. BARRIERS

STEPS OF COMPETITIVE ANALYSIS 4. ASSESS COMPETITIVE INTENSITY-INCLUDE CONDITIONS THAT FOSTERS INTENSE COMPETITION 5.IDENTIFY AVENUES FOR ATTAINING A SUSTAINABLE ADVANTAGE OVER COMPETITION 6.SOURCES OF COMETITIVE INTELLEGENCE YOU MAY COMBINE STEPS 3 AND 4 INTO COMPETITIVE MARKET FORCES

1. To gain an appreciation of the need for performing competitive analysis. 2. To understand the five step approach to carrying out a 3. To become acquainted with perceptual mapping and the techniques used. 4. To gain an appreciation and awareness of sources of competitive intelligence Chapter Objectives

Definition of the target market We establish the product market boundaries of interest and identify any specific target segments.

identifies direct competitors who are likely to gain or lose a substantial customer share over time because they serve the same customers and offer similar benefits.

perceptual mapping Perceptual mapping methods are used to position the firm against competitors as seen by the consumer. Product positioning is used to determine the brands that consumers see as being similar.

perceptual mapping Managers rely on some perceptual mapping techniques to portray how customers perceive the various market competitors. There are two types:

Multidimensional scaling relies on similarity judgments of consumers in determining the degree of similarity between pairs of products.

A factor analysis based approach relies on buyers assessment of determinant attributes to evaluate alternatives

ALMOST HOME THE BATTLE FOR THE COOKIE MARKET In 1982, marketers in the cookie industry received a doublebarreled attack with the entrance of Procter & Gamble's Duncan Hines cookies and Frito Lay's Grandma's brand. Initially, both lines were successfully test marketed in Kansas City, and by 1983, Frito Lay had begun moving into a variety of other markets.

ALMOST HOME THE BATTLE FOR THE COOKIE MARKET 1. Multidimensional scaling relies on similarity judgments of consumers in determining the degree of similarity between pairs of products. 2. A factor analysis based approach relies on buyers assessment of determinant attributes to evaluate alternatives

perceptual mapping YOU, THE TARGET RATED 10 TV DINNERS NOW APPLY YOUR ADVENTURE WITH YOUR SUPERMARKET FROZEN FOODS EXCURSION. YOU, THE TARGET RATED 10 TV DINNERS

Assessing competitive dynamics Assessing competitive dynamics, step 3 of the competitive analysis, involves attempting to project what the future competitive environment will look like.

Pioneering advantage {HOYLE SCHWEITZER invented WINDSURFER(ing)} is the market advantage that results from a competitor being the innovator in a market. Several factors contribute to this advantage:

1. Pioneer products act as "prototypes" for competitors. 2 1.Pioneer products act as "prototypes" for competitors. 2. Initial brands potentially build significant loyalty. 3. Late entrants will have difficulty obtaining awareness and trail by distributors and consumers. Pioneering advantage

If the future competitive structure of a market is to be understood, managers should attempt to determine the potential for technological discontinuity. Note- LPC WINDSURFER EXAMPLE Steps of competitive analysis (continued)

Although the identity of current direct competitors is important, it is equally essential to identify future competitors, i.e., new entrants. Such as…MISTRAL,BIC Steps of competitive analysis (continued)

Barriers to entry make it difficult to become a significant competitor in a new market. PLEASE REFERENCE OUR HANDOUT ON INDUSTRY ATTRACTIVENESS in your packet Steps of competitive analysis (continued)

Barriers to entry Economies of scale, initial financial investment, lack of access to sources of production, and limited access to distribution channels are some typical barriers to entry. Steps of competitive analysis (continued)

Barriers to entry …Tariffs, quotas, customs, and governmental intervention are some international entry barriers. Steps of competitive analysis (continued)

New entrants can cause considerable competitive concern through improved price performance trade offs, by bringing new skills to the industry,or by virtue of cross subsidizations. Steps of competitive analysis (continued)

The importance of assessing competitive intensity, step 4, is twofold: to determine the likely cost of meeting competition and to recognize the most important bases and types of competition. Steps of competitive analysis (continued)

Several basic conditions which foster intense competition are: numerous competitors, slow industry growth, undifferentiated products and services, low switching costs, significant economies of scale, industry overcapacity, and management loyalty Steps of competitive analysis (continued)

The ultimate purpose of performing a competitive analysis is to identify possible avenues for attaining a sustainable advantage over competitors so as to achieve product or product line objectives. Steps of competitive analysis (continued)

In assessing competitive advantage, managers must identify the positions and sources of advantage that lead to desired market performance outcomes. . Steps of competitive analysis (continued)

1. Positional advantages depend on the customer's perception of these advantages. . Steps of competitive analysis (continued)

2. Source advantages include: skills of people within the organization, the systems or arrangement developed for market response, and the organization's resources. . . Steps of competitive analysis (continued)

3. Superior resources, intangible and tangible, can enable a firm to either underprice the competition or to offer better or unique performance. . . Steps of competitive analysis (continued)

Sources for obtaining competitive intelligence fall into three basic categories: published material & documents, competitors' employees, suppliers, or customers; and direct observation. . Steps of competitive analysis (continued)

PLEASE REFERENCE OUR HANDOUT... INDUSTRY ATTRACTIVENESS SUMMARY AGGREGATE MARKET FACTORS INDUSTRY FACTORS ENVIRONMENTAL FACTORS

PLEASE , ALSO, REFERENCE THE BOOK THE ART OF WAR LPC1@UMSL.EDU

Competitive analysis-LPC@umsl.edu Don’t forget your handout packet: An exam question: We analyze a competitor on five abilities….. The abilitiy to………..